Mining Weekly

The conviction of international civil-engineering consulting firms and contractors on charges of bribing their way to lucrative contracts on the multibillion-rand Lesotho Highlands Water Project (LHWP) gives the lie to the perception that corruption is a Third-World phenomenon and that developed-world firms which pay bribes only do so under pressure from venal officials.

So says Lesotho’s attorney-general, Fine Maema, who points out that the evidence which emerged during the trials of former Lesotho Highlands Water Authority (LHWA) CEO Masupha Sole and the implicated international firms showed “quite clearly that the initiative came from the firms and not the bribed”.

The LHWP, owned jointly by the governments of Lesotho and South Africa, transfers huge quantities of water from the rugged peaks of the Mountain Kingdom to this country’s industrial heartland of Gauteng.

The LHWA is responsible for the construction, operation, maintenance and management of the gigantic project’s components which fall within Lesotho’s borders – the 185-m-high double-curvature Katse dam, the 145-m-high Mohale dam, the 20-m-high 180-m-long Matsoku weir, a hydropower station at Muela, and water-transfer tunnels.

The prosecution of Sole came in the wake of an audit which uncovered serious irregularities regarding the awarding of tenders.

He was later sentenced to an 18-year imprisonment term, which was slashed by three years on appeal.

Canada’s Acres International was convicted of bribing Sole and fined R23-million, but this was reduced to R15-million when the engineering consultancy lodged an appeal.

Lahmeyer International, Germany’s biggest engineering consultancy, was the second firm to be convicted but, unlike Acres, it had its fine increased from R10,6-million to R12-million when it appealed against the Lesotho High Court’s decision in the Court of Appeal.

More firms are accused of winning contracts after paying bribes.

The payments used to grease Sole’s palms were channelled through intermediaries.

The Lesotho prosecuting author-ities’ case against the accused firms was bolstered when one of the intermediaries, Michael du Plooy, agreed to an arrangement in terms of which he was fined R500 000 and given a suspended sentence in return for a statement describing not only his corruption, but also that of Sole and Italy’s Impreglio, the lead company in Highlands Water Venture, the consortium which built the massive Katse dam.

“Before Du Plooy pleaded guilty to receiving $750 000 from Impreglio and sharing it with Sole, the prosecution had been forced to rely on circumstantial evidence only as no one was prepared to come forward and explain what had happened, not even on the basis of an indemnity against prosecution,” says Maema.

What the Lesotho attorney-general describes as a breakthrough came in February this year – nearly four years after Sole first appeared in court – when Schneider Electric SA pleaded guilty to 16 counts of bribery and was subsequently fined R10-million.

Maema says that the successful prosecution of the international firms has helped change the perceptions of developed countries regarding corruption in the Third World.

“This change of attitude has resulted in much closer cooperation between the prosecuting authorities in Lesotho, the Lesotho police and their European counterparts,” says Maema.

“Furthermore, in recognition of Lesotho’s stance against corruption and the apparent success in prosecuting the corruption trials, I was invited by Judge Eva Joly, who is a leading international figure in the fight against corruption, to join some eminent persons to be a signatory to the Paris Declaration, which was launched in June, 2003, in Paris.” The declaration is a call for action against large-scale corruption.

Maema says an important lesson to be drawn from the scandal is that “when you prosecute international bribery you are on your own”.

He explains that, despite assur-ances made at a 1999 meeting with representatives of the governments of South Africa and the European Union, the World Bank, the European Investment Bank and other banks in Europe, Lesotho has not received financial assistance to continue with the prosecutions, which have been a major drain on its fiscus.

“But in the last month or so there have been further discussions between South Africa and Lesotho on the question of financial assistance and, hopefully, something will come out of it,” he says.

When the LHWP bribery scandal broke in 1999, the World Bank, a joint financier of the project, probed Acres International, but did not take any measures against the Canadian firm, as its investigators did not prove any wrongdoing on its part.

The World Bank last month reopened its inquiry into Acres International following the failure of its appeal, and Maema says he is keen to see if the Bretton Woods institution will heed the comments made by Lesotho’s chief justice when he threw out Lahmeyer’s appeal.

The chief justice had said: “It is incumbent on the international community and, particularly, funding agencies to revisit the practices and procedures they have in place and to use the sanctions they have the power to impose whenever contraventions of the kind proved in this project occur.” It has been speculated that Acres International and other convicted firms will be barred from future World Bank-funded projects, including a possible second phase of the LHWP.

And with the international giants disqualified, South African civil-engineering contractors and consulting firms will stand a better chance of clinching a bigger part of the project.